Achieving the intended effect on the currency exchange requires acting according to a strictly defined investment strategy. Among the many more or less complicated methods, three basic tactics can be distinguished that will work in any situation that may take place on the Forex market.
Investing in line with the trend.
This type of Forex strategy is considered to be one of the best. By following the currency comments or the current situation on the currency exchange market, you can always find a pair whose value changes with the trend. An example may be the trend of the Swiss franc exchange rate, commented by Daniel Kostecki from XTB: “Today the situation is most interesting for pairs related to AUD. We have already mentioned this in the morning commentary, but it is a fact worth emphasizing as it is possible to reverse the trend in the long run. It all started with another iron ore collapse, the prices of which fell significantly due to lower imports from China. On the other hand, Australia is a large ore exporter, and lower demand from China also causes concerns about the local market and the negative impact on the Australian economy. Hence, investors started selling AUD yesterday evening. Moreover, the minutes of the meeting of the Bank of Australia appeared tonight, according to which it follows that the RBA will leave interest rates unchanged for a long time, as inflationary pressure is not strong enough to raise rates (not so long ago, Australia had be the second country after New Zealand to raise the cost of money). Additionally, the minutes stated that a weaker AUD would help economic growth. ” All the methods used by currency traders that are based on trend investing are much more likely to be successful.
The strategy used during market consolidation
On Forex there are also periods when the market is in a state of consolidation. Most of the strategies used by currency traders are completely ineffective in the absence of a clear trend in the market. At times, this may be an extended period of time. When nothing indicates changes, and the consolidation is repeated in each currency comment, the chance to be active in this period is to use one of the strategies that works in the consolidating market. Most of these methods are based on technical analysis charts, which allow you to set minimum and maximum prices for a given currency, which are a signal to open a buy or sell position for a specific currency pair.
Moving Averages Strategy
All methods that use moving averages are ideal for stronger breaks in a trend. By finding a moving average that shows both the opening and closing prices as well as the lowest and highest value that has occurred on the Forex exchange over a specific time frame, you can find all active and dynamically changing support and resistance levels. Careful observation of these values allows you to determine the most convenient time to open a given position on the currency market, which will vary depending on the selection of a specific tactic.
There are a large number of investment tactics in use in the currency market, most of which are based on the above three basic strategies. An investor who wants to be successful in currency trading on Forex should choose the method that best describes the current situation on the currency exchange. In order to check the effectiveness of the chosen investment strategy, it is worth checking its operation on one demo platform offered by some currency market brokers. One of them is X-Trade Brokers, which additionally has an extensive analysis department for its clients, providing the most up-to-date currency commentary. The use of such tips is a great help, especially for beginner players who are just starting to trade currencies.